Wall Street AI panic benefits Asian chip stocks, global funds shift towards upstream "shovel sellers"

Notice that the fear of artificial intelligence causing business disruption on Wall Street is transforming into a blessing for Asian stock markets, stimulating demand for regional leading chip manufacturers that dominate the industry's supply chain. So far in 2026, the MSCI Asia Pacific Index has risen by more than 12%, contrasting sharply with the fall of the US benchmark index. US stocks were previously sold off due to concerns that AI models could threaten businesses of software, legal, and real estate service providers. This year, the S&P 500 Index has fallen by 0.2%, while the tech-heavy Nasdaq 100 Index has dropped by around 2%. This divergent trend highlights a shift in global fund preferences: from burdening AI pioneers with massive expenses, to favoring hardware manufacturers with strong pricing power, many of which are located in Asia. The surge in memory chip prices has boosted the shares of regional heavyweights like Samsung Electronics, while the irreplaceable position of Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR (TSM.US) as a global leading chip manufacturer has also supported the stock market in Taiwan. Since the disruptive change brought by artificial intelligence, Asian stock markets have outperformed the US stock market. Richard Tang, Head of Research at Pictet Hong Kong, said, "The main concern in the US is the massive spending of large-scale enterprises. Most of Asia's technology exposure is upstream. Regardless of who wins in the end, the upstream parties can always generate income from downstream participants." Asia has a large number of advanced chip manufacturers, semiconductor foundries, and assemblers that are crucial for AI infrastructure, which is a key reason why the region showed resilience during the recent Wall Street downturn. Recent comments from Micron Technology, Inc. (MU.US) about tight supply of memory chips, and statements from NVIDIA Corporation (NVDA.US) about sustainable spending, have reinforced this perception. As a signal of growing foreign demand, Samsung Electronics set a record for the largest overseas buying on Thursday, pushing its stock price up by 6.4%. At the same time, weekly purchases of Taiwanese stocks also hit the third highest historical level during the shortened trading week due to the holidays. Meanwhile, the Nasdaq 100 Index has fallen by 4.6% in the past 10 trading days, with a market value evaporation exceeding $15 billion, as software stocks and other stocks facing risks from new AI tools were sold off. Stephanie Aliaga, Global Market Strategist at J.P. Morgan Asset Management, said in an interview, "Some of the fears in the US are also good news for Asia, especially when considering what infrastructure is needed for an 'Agentic AI.' The market is truly beginning to digest the 'ChatGPT moment' of Agentic AI." The significant weight of major chip manufacturers in Asia's local stock markets has further amplified their impact on the overall trend. The weight of just one company, Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR, in Taiwan's weighted index is close to 45%, three times the level from a decade ago. The South Korean Kospi Index has almost formed a duopoly, with Samsung Electronics and SK Hynix combined accounting for nearly 40%. While the so-called "AI panic trade" has also heavily impacted US real estate service stocks and insurance brokers, Asia has suffered less damage because some local companies have been slower to react to cutting-edge technology. Since February 3, the insurance sub-index of the Topix Index has risen by 6.2% and the real estate sub-index has surged by 15%. Andrew Jackson, Director of Japan Equity Strategy at Ortus Advisors, said, "So far, the traditionalists have won. This has protected them from the sell-off effect caused by AI disruption, because these industries are more deeply rooted in Japan, and currently have a lower level of openness to disruption." Data shows that the correlation between Asian and US stock markets based on weekly returns has fallen to 0.43, the lowest level since June 2022. Certainly, Asia is not completely immune to global turmoil. Although the proportion of Indian tech services companies, including Infosys Ltd., in the regional stock market is small, they have also declined along with their US counterparts in recent sell-offs. But for now, due to the different roles local companies play in the AI ecosystem, lower valuations, and stronger profit growth, it is expected that Asian stock markets will continue to outperform the broader market. Elfreda Jonker, Portfolio Manager at Alphinity Investment Management, said, "We invest in chip manufacturers and other AI enablers. One of our top holdings is Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR, which we continue to be bullish on. All roads to AI lead to Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR."